Dispute Prevention and Resolution

This source document describes the work done during an investigation into alternative dispute resolution (ADR) in construction. The full spectrum of ADR techniques is reviewed. Emphasis is placed on dispute review boards (DRBs) because of their documented success in resolving disputes at the project level.

The research was performed under the guidance of the CII Dispute Prevention and Resolution Task Force and set out to achieve four specific objectives:

1. To gain an understanding of the nature of disputes in construction and of the steps needed to prevent and resolve disputes as part of the construction contract administration process.
2. To study the growing field of alternative dispute resolution in construction with particular emphasis on techniques which either prevent disputes from occurring or assist in the timely on-site resolution of those which do occur.
3. To study the functioning of dispute review boards (DRBs) in the field in order to identify the factors which contribute to their success or failure.
4. To determine whether DRBs can be successfully implemented in the private commercial and industrial sector of the industry, and:
   1. If the conclusion is negative, state why DRBs cannot be used.
   2. If the conclusion is positive, develop practical guidelines for implementing DRBs in the private commercial and industrial sector of the industry.

The methodology adopted to achieve the objectives included the following distinct activities:

1. A period of desk research and broad-based field interviews to develop a thorough knowledge of the subject.
2. A period spent trying to identify pilot projects on which DRBs could be implemented and studied.
3. A questionnaire-based survey of CII member companies to gather information on the need for and perceptions regarding alternative dispute resolution procedures.
4. A fifteen-month period spent monitoring the functioning of a DRB throughout the construction of a major commercial building.
5. A number of visits to functioning DRBs to observe their operational dynamics and note the different approaches used in implementing the concept.

The knowledge gained throughout the research was discussed in depth at Task Force meetings. This made it possible for Task Force members to review the work in progress and use their observations, knowledge and experience to provide input. The final conclusions and guidelines developed are thus a product of the research as well as the knowledge, experience and unique perspectives of the Dispute Prevention and Resolution Task Force members.

The understanding of disputes in construction gained during the research led to five main conclusions. These may be summarized as follows:

1. The industry must change. Conflict and litigation in the construction industry must be reduced by adopting a comprehensive and systematic approach to the prevention and resolution of disputes.
2. The change requires three key steps. The process must start right to prevent problems from arising, it must stay right to prevent problems from escalating into disagreements and disputes, and it must provide for resolution to prevent disputes from crossing the “continental divide” and escalating into conflict and litigation.
3. DRBs work. DRBs facilitate the timely on-site resolution of disputes. They emphasize the early and continuing involvement of respected experts. They do not start too late, take too long and cost too much [ASCE 1991].
4. Project personnel must remain directly involved. Disputes are best resolved on-site with the project managers playing a major role. This insures that those directly involved in the dispute remain involved with the resolution. This helps in avoiding litigation and returns construction back to the engineer and construction professional [ASCE 1991].
5. Owners hold the key to implementing the system. Owners hold the key to starting right, staying right and providing for resolution. This does not diminish the contractor’s role in dispute prevention and resolution. Implementing the system may, primarily, be the owner’s responsibility; successful operation is shared by owner and contractor.

It is recommended that the findings of this research be implemented through the development and deployment of training courses. These should focus on dispute prevention as well as resolution. They must emphasize the fact that positive, proactive on-site dispute resolution is more effective that the negative reactive approach currently plaguing the construction industry.

The emphasis placed on DRBs throughout the research and the comprehensive field work done to study their operation confirmed that DRBs can be successfully implemented in the private commercial sector of the industry. The concept requires that three expert neutrals are appointed at the commencement of construction to visit the site regularly and assist the project participants in reaching timely agreement on matters they cannot resolve between themselves. The informal trust-based nature of the board’s role is consistent with the concept of partnering. The on-site focus of board activities and the emphasis placed on timely resolution of disputes by the project participants is consistent with the principle that disputes are best resolved by those directly involved.